By Nicholas Larkin Sept. 14 (Bloomberg) -- Gold fell from an 18-month high in London as the dollar rebounded, curbing demand for the precious metal as an alternative investment. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, gained as much as 0.6 percent after falling on Sept. 11 to the lowest level in almost a year. Gold, which reached $1,011.95 an ounce on Sept. 11, the highest price since March 2008, typically moves inversely to the dollar. “We expect the dollar to play a heavy hand in the metal’s direction, with gold vulnerable to sharp correction should safe- haven interest return to the greenback,” James Moore, an analyst at TheBullionDesk.com in London, wrote in a report. Immediate-delivery bullion slid $7.83, or 0.8 percent, to $997.38 an ounce by 11:25 a.m. local time. The metal added 1.1 percent last week, a fourth consecutive gain. December gold futures were 0.8 percent lower at $998.70 an ounce on the New York Mercantile Exchange’s Comex division. The metal declined to $994.25 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,008.25 at the afternoon fixing on Sept. 11. Spot prices, which reached a record $1,032.70 an ounce in March 2008, may climb to $1,050 this year as a weakening dollar boosts demand for the metal, Bank of America Securities-Merrill Lynch said in a report dated Sept. 11. ‘Crucial’ Week Crude oil fell for a second day as higher U.S. fuel stockpiles raised concern that gains in prices may have outpaced the recovery in the global economy. Some investors use oil prices as an inflation guide. “This week will be crucial in determining whether speculators can keep gold prices underpinned without the temptation to book profits,” Andrey Kryuchenkov, a VTB Capital analyst in London, wrote today in a note. “A reversal in the dollar sell-off trend would see severe profit-taking and intensive unwinding in speculative gold positions.” Hedge-fund managers and other large speculators increased their net-long position in New York gold futures by 22 percent in the week ended Sept. 8, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets that prices will rise, outnumbered short positions by 224,676 contracts. “We are concerned by very large speculative long positions held on Comex,” John Reade, UBS AG’s head metals strategist in London, said today in a note. “We recommend that nimble investors take profit in gold and silver at current levels and look to re-enter the market” at lower prices. Silver Drops Holdings of bullion in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, were unchanged at 1,077.63 metric tons on Sept. 11, data on the company’s Web site showed. The fund reached a record 1,134.03 tons on June 1. Gold held in ETF Securities Ltd.’s exchange-traded commodities added 0.7 percent to a record 8.217 million ounces on Sept. 11, the company’s Web site showed. Silver for immediate delivery in London slid 2 percent to $16.41 an ounce after reaching a 13-month high of $16.995 on Sept. 11. Platinum lost 0.8 percent to $1,307.60 an ounce. The metal reached $1,324.15 on Sept. 11, the highest price in a year. Palladium fell 0.7 percent to $290 an ounce. ETF Securities’ silver holdings rose 1 percent to a record 20.728 million ounces on Sept. 11, while palladium assets climbed 1.4 percent to an all-time high 489,942 ounces.

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